Govt's attempt to sell entire 51% stake in Pawan Hans finds no takers

The government’s attempt to sell its entire 51 per cent stake in helicopter company Pawan Hans has received a setback, with the deal failing to attract enough bidders. Now, a rebidding is on the cards.

According to sources aware of the development, the government, which has set an ambitious disinvestment target of Rs 800 billion for 2018-19, was forced to cancel the stake sale after one of the two shortlisted bidders pulled out of the race citing “lack of interest”. The two finalised bidders were Indian helicopter major Global Vectra Helicorp and US-based Continental Helicopters.

“According to the guidelines of the Central Vigilance Commission, it is advisable that there should be a second bidding round if during the first call, a single bid is received. We want to follow all rules so that it is a fair disinvestment process. Hence, we have decided to go for a rebidding,” said a senior government official.

The government had invited bids from private companies, including foreign ones, to buy its stake, along with management control, in the helicopter service operator. While the last date for submitting expressions of interest (EoIs) was December 8, it was later extended till December 15.

Industry insiders said prospective bidders were reluctant to buy a stake in a company in which a government-owned entity, ONGC, held a substantial stake. ONGC owns a 49 per cent stake in Pawan Hans.

Source: Pawan Hans

“Most of the helicopter companies provide services in the oil and gas sector, and hence ONGC will be a major customer. In such a scenario, who will want ONGC to hold a 49 per cent stake in the company? This is a case of conflict of interest,” said an executive of a company that had expressed interest in Pawan Hans.

Civil Aviation Secretary Rajiv Nayan Choubey didn’t comment on the issue, while queries sent to the Department of Disinvestment and Public Asset Management (DIPAM) didn’t elicit a response.

Experts said the government should have followed the suggestion given by SBI Caps and done a public listing in which ONGC could have reduced its stake. “The company is profitable. ONGC would have a made a lot of money by selling a stake in the market. Now that the attempt of a stake sale has failed, the government has lost the chance of a profitable IPO too,” said Mark Martin, founder of aviation consultancy firm Martin Consultancy.

Sources said the government had set a reserve price of around Rs 3 billion for the entity.

Pawan Hans has a fleet of 43 helicopters and operates largely in remote areas. It has run a profitable operation, registering a profit of Rs 2.48 billion in 2016-17.

The Centre has planned the privatisation, or strategic sale, of a number of state-owned companies and properties to meet its budgeted target of Rs 800 billion for 2018-19. Besides Pawan Hans, the process is underway to sell stakes in Air India Dredging Corp, HLL Lifecare, and Indian Medicines Pharmaceutical Corporation Limited (IMPCL), and five hotels of India Tourism Development Corporation (ITDC).